Thursday, June 22, 2017

Meet The Real Amazon Drones

An employee loads a truck with boxes to be shipped at the Amazon.com, Inc. distribution center in Phoenix, Ariz., on Nov. 26, 2012. (David Paul Morris/Bloomberg via Getty Images)

At least five days a week, Myron
Ballard races around Washington, D.C., with a cargo van full of Amazon
Prime packages. A career delivery driver with 20 years behind the wheel,
Ballard typically gets paid $1.50 for each address he visits. If he
delivers 150 Amazon boxes — a fairly routine number — he can pull in
$225. Not bad for a day’s work.

That is, until he starts tallying up all his out-of-pocket costs.
Ballard works for an Amazon contractor called LaserShip. He’s
technically an “independent contractor,” not an employee, meaning all of
the costs stemming from the deliveries fall on him rather than on
LaserShip or Amazon.

Ballard had to purchase the cargo van he drives for work. He doesn’t
get reimbursed for the wear and tear he puts on it; for the gasoline he
pours into it on a near-daily basis; for the auto insurance he needs to
carry; or for the parking tickets he inevitably racks up downtown. He
doesn’t even get reimbursed for the LaserShip uniform he’s obliged to
purchase and wear.

At the end of the day, much of that $225 has vanished.

“It’s like they want us to be employees, but they don’t want to pay for it,” said Ballard, 45.

Anyone who shops regularly online, particularly with Amazon, has to
marvel at how quickly and cheaply packages arrive on the doorstep these
days. Many of the millions of Amazon Prime members — including this
reporter — may have noticed, however, that not all packages are ferried
by workers wearing the familiar UPS, FedEx or U.S. Postal Service
uniforms. Instead, they’re sometimes handled by smaller companies like
LaserShip, with drivers working on contract and out of their own
vehicles.Delivery drivers are the real Amazon drones
— workers who hustle to feed our growing demand for next-day or
same-day delivery from online retailers. And as the e-commerce industry
continues to grow, the drivers classified as independent contractors are
the ones feeling the squeeze.

These particular drivers work under a system that shifts the costs associated with employment away from the company and onto the worker.
In this arrangement, a busted transmission can be the difference
between putting food on the table and being out of a job. That’s partly
why the service is so cheap for retailers, and, ultimately, for
customers as well.

For starters, a delivery company using independent contractors avoids
paying payroll or unemployment taxes on its drivers, as well as
workers’ compensation insurance — nevermind basic workplace benefits
like health coverage and a 401(k). Such companies also aren’t obliged to pay workers overtime
under federal law, meaning no time and a half when the delivery day
stretches into a 12-hour shift. And since they pay drivers on a
per-delivery basis, they don’t owe them anything for non-delivery work,
like loading the van at the warehouse before hitting the road, a task
that can take up to two hours. The arrangement also makes it virtually impossible for the drivers to unionize since they’re non-employees.

“The biggest savings for the employers, and the reason they’re so
devoted to the business plan, is the workers’ comp and the tax stuff.
It’s really lucrative,” said Catherine Ruckelshaus, a lawyer with the
National Employment Law Project, a worker advocacy group. “The work is
all dictated by the employer, and they’re not investing anything in [the
driver’s] business.”

The arrangement appears essential to the bottom line of LaserShip,
a once-small “last mile” courier company founded in 1986 and based in
Vienna, Va., that’s grown right along with the e-commerce boom. Although
as a privately held company LaserShip doesn’t disclose its size or
revenue, it now handles deliveries for Amazon and others in areas
stretching from New England down to Florida. Without the elaborate and
costly distribution network of, say, UPS, a courier company like
LaserShip is well-positioned to perform fast, cheap deliveries in dense
areas like Washington.

Just last month, the company said it had expanded its service area
by 44 percent, adding New Hampshire, Rhode Island, West Virginia and
Delaware to the list of states where it delivers. “We are widening the
net for e-commerce shippers to reach more consumers, in less time, at
competitive ground rates — everybody wins,” an executive said in a March
press release.

Plenty of LaserShip drivers don’t count themselves among the winners.
Despite the brisk business through Amazon, The Huffington Post
interviewed a half-dozen drivers who said they were recently asked to
accept a new contract reducing their pay. The proposal amounted to a 10
percent pay cut, the drivers said.

Earlier this month, a judge approved a class-action settlement that requires LaserShip to pay $800,000
after drivers in Massachusetts accused the company of wrongfully
misclassifying them as independent contractors in order to save money.
The workers maintained
that they were in fact employees and therefore eligible for minimum
wage and overtime protections. A LaserShip spokesman declined an
interview request for this story; the company also declined to respond
to a list of emailed questions on its pay practices.

According to court records, work contracts and driver pay stubs
reviewed by HuffPost, LaserShip appears to make money off of more than
just drivers’ labor. The company extracts a variety of fees that can
drive down a worker’s earnings significantly.

Some of these deductions are on the smaller side, like a $6 weekly
“administrative” fee, ostensibly to cover the cost of paperwork and the
pay stub itself. Others are more considerable, like a $23 weekly
“insurance” fee, separate from the driver’s own auto insurance. The
“radio” rental, covering the hand-held computer drivers use to scan
boxes they deliver, costs another $22.50 per week. Numerous drivers told
HuffPost they have no choice but to lease it from the company.

That means that over the course of a year, a driver could pay as much
as $1,170 for the privilege of renting a piece of equipment that the
company requires him or her to use.

But those expenses pale when compared to what drivers pour into their
vehicles. Drivers typically spend thousands of dollars a year on
gasoline. They can write off the cost on their taxes, but they can’t get
reimbursement for it. Stephen Ellis, who drove for the company for less
than a year and quit in 2010, remembers filling up his sedan at the gas
station almost every day and putting tens of thousands of miles on it
in a matter of months.

“That’s really why I got out,” said Ellis. “The bills on the car, to
give it regular maintenance, it was $800 every three months or so. … It
was crazy.”

A driver like Ballard can gross $60,000 a year if he’s willing to
work 80-hour weeks, but expenses will drive that haul down closer to
$40,000. Then he takes a big tax hit come springtime, having had no
withholdings throughout the year. He also gets no health coverage or
paid time off through the job, and his pay fluctuates from week to week.

Despite his two decades in the field, Ballard said he now earns
significantly less than he used to in a previous job with UPS. According
to the job survey site Glassdoor.com, hourly UPS drivers earn an average of about $55,000 per year, and salaried drivers make $70,000 with benefits.

One current LaserShip driver, who asked to remain anonymous for fear
of losing his contract with the company, said that when his vehicle
recently broke down while delivering Amazon packages, he invested in a
used van to make sure he kept his route. In addition to leveraging
$7,000 of his own savings and credit, he took out a loan facilitated by
LaserShip. The principal plus interest were deducted directly from his
paychecks, which were reviewed by HuffPost.

After taking on debt in order to keep his job, the man was asked to accept a lower per-delivery pay, he said.

“That’s part of their pitch: ‘You’re investing in your company,’” the
driver said. “I thought I was investing. But now I’m facing a pay cut.”

In
the future, Amazon packages may be delivered by unmanned aircraft, but
for now there’s a different kind of Amazon drone at work getting goods
to your doorstep. (AP Photo/Amazon)

The use of independent
contractors isn’t new to the delivery business. FedEx is often credited
with perfecting the scheme. The practice has helped make the company’s
ground shipping subsidiary a giant in the industry, though it’s also led
tolawsuits filed by workers who, like the LaserShip drivers in Massachusetts, believe they are actually employees owed labor protections under the law.

Ivan Hofmann, an industry consultant with ETC & Associates, is a former FedEx Ground executivewho helped develop the company’s independent contractor system. Hofmann said he remains a “firm believer” in the model.

“It’s the American way,” Hofmann said. “When paid by the hour, the
motivation is the hour. We paid by the stop and the piece and the
weight. The faster you worked, the more money you made. Your income
wasn’t fixed. You could make a lot of money if you were smart and you
hustled.”

The problem, Hofmann added, is that the incentive structures at some
delivery companies aren’t enough. “It can be fair or not,” he said.

Mike Johnson has delivered packages since 1996, doing stints with
UPS, FedEx and now LaserShip. He said the pay structure for an
independent contractor under FedEx came with certain sweeteners that are
absent at LaserShip. They included bonuses for being accident-free and
for carrying the FedEx brand on his vehicle.

“When you have three FedEx routes, you’ve got money set aside for when your truck breaks down,” Johnson said.

Perry Colosimo, a FedEx spokesman, wrote in an email that FedEx
Ground has always done its business through independent contractors. As
online retail has grown, a lot of FedEx contractors have hired more
drivers, he said.

The typical LaserShip contract offers drivers no guarantee on their
routes or the number of packages they’ll carry. It also stipulates that
either LaserShip or the driver can end the contract with just 15 days’
notice. If a driver refuses to accept lower pay, the company in theory
can terminate the arrangement.

“There’s no job security,” Johnson said.

At this point, a lot of businesses have become wholly dependent on
the independent contractor scheme as a way to keep costs down. This is
particularly true of the trucking and courier industries, which lawyers
are now targeting with lawsuits alleging worker misclassification. Other
little-known shipping companies used by Amazon — such as OnTrac and Prestige— have sought independent contractors for work.

A trade group has even sprouted up to beat back state and federal efforts to rein in abuse under the model. The group is called It’s My Business,
implying that it represents the interests of independent contractors,
rather than the companies that use them. The group says on its website
that legislative threats to the model could “force thousands of people
to close their businesses and fire employees.”

It’s My Business is chaired by former Democratic Sen. Blanche Lincoln
(Ark.), whose name is attached to various op-eds calling independent
contractors the “quiet engine” of whatever state the op-ed is running in (including one on HuffPost). Among the group’slisted members are the Customized Logistics and Delivery Association, a trade lobby that’s had a LaserShip executive on its board, as well as FedEx Ground.

Some delivery companies may feel they have little choice but to
employ the scheme, particularly if they’re trying to cut costs enough to
win or maintain contracts with the likes of Amazon. If they can’t do
the work at a price Amazon finds acceptable, surely the world’s largest
online retailer could find someone who will.

That’s what a LaserShip co-founder, Farhang Aryan, suggested in a deposition
related to the Massachusetts lawsuit. Aryan said an increase of 5
percent in what the company asks of its customers like Amazon could get
it “terminated” from its contracts.

“I know of situations [where] a customer says, ‘If you do not
increase the rates, I will give you [an] additional year of contract,
and if you want to do any increases, this has to go to a bidding
process,’” he said.

William Deschenes, a former Lasership manager, noted in his
deposition that Amazon is now LaserShip’s largest customer by any
measure. According to Deschenes’ testimony, Amazon expects that 98.5
percent of its deliveries arrive on time, and LaserShip drivers are
measured under a rubric known as “deficiencies per million
opportunities,” or DPMOs, i.e., failed deliveries. Drivers told HuffPost
that LaserShip management informed them they could lose their work
through Amazon if the drivers can’t keep their DPMO levels down.

It isn’t clear how large or small a piece of Amazon’s delivery
operation LaserShip handles, or how much the retailer relies upon
companies using contractors and their personal vehicles. Amazon didn’t
respond to interview requests.

One of the plaintiffs in the Massachusetts lawsuit, Milton Sanchez,
testified that LaserShip management suddenly cut his pay. He alleged
that it was customary for drivers to be pressured “under duress” to sign
new contracts lowering their own rate.

“At the beginning we were making a decent pay,” Sanchez testified.
“And then they started cutting, cutting. … They couldn’t make money
with the client, so they make money with us. That’s the way I see it.”
Asked about the various costs that drivers are forced to swallow,
Sanchez said, “You break it down, and I’ll start crying.”

The driver whose vehicle broke down is among the LaserShip
contractors who said they were asked to sign new contracts dropping
their pay. He has so far refused.

He said he now regrets putting his savings and a high-interest loan
toward a cargo van he will in all likelihood run into the ground.
Lately, he’s been working 12-hour days, six days a week, sometimes
delivering more than 200 Amazon packages in a day’s work. He frets over
his van breaking down again — and his contract coming to an end.

“I know they’ve given us a job, and we have to respect that,” the
driver said. “But when you work hard, they should pay you more — not
take more away.”

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This is a blog about what interests me. Here you will find stories on animals, including animal rights material, cute stuff, and random informative posts about weird, beautiful and interesting creatures. Horses, Spotted Hyenas, and Border Collies will make regular appearances.
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